ICRA has reaffirmed ratings on Jindal Steel and Power Ltd's (JSPL's) bank facilities and non-convertible debentures due to its healthy standalone operating performance in FY21 despite subdued demand trends and challenging market conditions.
The removal of JSPL ratings from watch with negative implications factors in abatement of the near-term liquidity and refinancing risks related to significant debt obligations in its international subsidiaries in Mauritius and Australia.
The ratings were placed on a watch following a delay by JSPL in arriving at a conclusive arrangement to reschedule or refinance international debt repayment obligations of these overseas subsidiaries amid Covid-19-led disruptions in the market.
The rating watch also factored in the possibility of an adverse impact of the pandemic on global and domestic steel demand as well as realisations that could have hindered its ability to extend the required funding support to its international subsidiaries.
However, ICRA said the rating reaffirmation factors in JSPL's healthy standalone operating performance in FY21 despite subdued demand trends and challenging market conditions.
Its healthy operating performance (year-on-year growth of 12 per cent in steel sales volumes in 5M FY21) reflects favourably on its operational strengths and competitive positioning.
Steadily improving production and sales volumes together with access to royalty-paid iron ore fines stock and favourable raw material prices have facilitated healthy improvement in performance of the company's standalone steel operations, thereby improving the entity's ability to support the sizeable repayment obligations in the international subsidiaries.
Besides, the company's liquidity profile has been supported by increased reliance on short-term export advances and tie-up of additional lines of credit in the domestic balance sheet.
ICRA said it expects JSPL to sustain healthy performance in its domestic steel operations in the current fiscal.
( With inputs from ANI )
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